The Nuclear Decommissioning Authority: Taking forward decommissioning

“The Nuclear Decommissioning Authority took on the tough job of decommissioning the UK’s legacy nuclear facilities. It has put a lot of effort into determining the scale and nature of the task ahead. Whilst the scale of the task is now better defined, estimates of costs to the taxpayer have continued to rise. At the same time, the start and stop nature of decommissioning work at some sites lessens the value for money of the significant resources invested to date.”

“The Nuclear Decommissioning Authority took on the tough job of decommissioning the UK’s legacy nuclear facilities. It has put a lot of effort into determining the scale and nature of the task ahead. Whilst the scale of the task is now better defined, estimates of costs to the taxpayer have continued to rise. At the same time, the start and stop nature of decommissioning work at some sites lessens the value for money of the significant resources invested to date.”

Sir John Bourn, head of the National Audit Office, 30 January 2008

The Nuclear Decommissioning Authority has established the first comprehensive programme to clean up the UK’s first generation of public sector civil nuclear facilities. A report out today by the National Audit Office shows that the Authority has made progress but will need to tackle significant challenges if it is to ensure a step change in the decommissioning of nuclear facilities in the UK.

According to the report, estimated costs of decommissioning continue to rise rapidly, even for the most imminent work which might have been expected to have stabilised by now. Progress at some decommissioning sites has been hampered by changes at short notice to funds available, bringing uncertainty for sites and lessening value for money. And the Authority needs to develop its approach to contracting for decommissioning if it is to secure value-for-money in the long run for the taxpayer.

The report found that the nature and scale of the decommissioning task inherited by the Authority in 2005 was highly uncertain. Many of the Authority’s sites had not been designed with decommissioning in mind. And record-keeping, particularly in the early days of nuclear development, had not always been sufficiently detailed to inform decommissioning several decades later. The Authority has invested significant effort in defining what needs to be done and has introduced industry-wide procedures requiring its sites to prepare plans on a consistent basis.

Plans for decommissioning individual sites have gone through a number of iterations and cost estimates have increased significantly. In part, this reflects a more complete assessment of the range of work that needs to be taken forward. In 2007 the Authority estimated that the undiscounted cost of decommissioning its 19 sites over a 100 year period was £61 billion and that it would cost a further £12 billion to run operating sites to the end of their commercial life. This total lifetime cost of £73 billion was almost £12 billion (18 per cent) higher than the 2005 estimate. Point estimates of decommissioning costs must be interpreted with great caution, and in the knowledge that uncertainties will tend to be greater for more distant tasks.

Between 2005-06 and 2007-08 the Authority’s budgeted grant-in-aid increased from £1,178 million to £1,420 million. This has enabled significant resources to be allocated to decommissioning, particularly at Sellafield. Progress in decommissioning most Magnox and research sites has nevertheless been hampered by emerging pressures on the Authority’s financial position, including the need to fulfil additional urgent expenditure commitments – especially at Sellafield – and volatility of income from its ageing and unreliable commercial facilities. The ‘start-stop’ nature of decommissioning at these sites means projects can be halted at short notice. These changes have created significant uncertainty for site licensees and their contractors, and have resulted in additional costs for the taxpayer.

The Authority recognises that it must develop its approach to contracting for decommissioning. The Authority’s use of cost reimbursement contracts was appropriate in the early stages of decommissioning. However, reimbursement contracts mean that any additional costs incurred by sites are met by the taxpayer.

Among its recommendations, the NAO says that the Authority should determine the reasons for the continuing increases in cost estimates submitted by the sites, particularly on those elements of work which, by now, should have been reliably costed. In the absence of stable cost estimates, the Authority must consider how it will compare the likely cost outcomes of bidders’ proposals in the forthcoming competitions. It must also consider how, after contracts have been let, it can subsequently lock the appointed parent bodies into price and incentive regimes which provide the taxpayer with good value.